News & Insight • Weekly Newsletters

14 July 2023 | William Buckhurst

That Was The Week That Was

MACRO

• US CPI came in lower than expected at 3% annualised, 10 and 2-year bonds yields fell and equity markets rallied
• The US dollar continues to be weak, now at 1.31 vs sterling and Gold just below $2,000
• UK GDP growth is still anaemic with a 0.1% contraction in May, but not nearly as bad as many commentators had predicted
• Meanwhile, China’s latest CPI print remained flat year-over-year in June and was at the lowest level since February 2021

COMPANY NEWS

• UK bank stocks reacted positively to the publication of the latest stress test results from the Bank of England. The report concluded that no bank was required to strengthen its capital position although it acknowledged the risks that borrowers are facing from higher mortgage rates while noting that banks are strong enough to deal with it. The BoE stated that banks would have enough capital to continue lending through a shock to the economy including a housing market crash, peak unemployment, and inflation of 8.5% and 17% respectively along with interest rates of 6%
• Experian issued a trading statement showing that revenue growth continues to tick along at around 5%
• WD-40 Company stock rose after it reported third quarter results beating estimates on revenue and profits. Perhaps due to over half of revenues not being in dollars
• A raft of banks kicked off reporting season in the US, with JP Morgan and Wells Fargo coming in with decent prints as they made more money from their net interest margin. Citigroup didn’t fare as well
• Both Ericsson and Nokia announced profit warnings stating customers, especially in North America, were curbing spending and reducing inventory levels
• Signs of life in the watch market as both Swatch and Watches of Switzerland (a proxy Rolex retailer) both giving positive guidance following in line revenue
• PepsiCo are bubbling along nicely as both sales and earnings were ahead of expectations with the only disappointment being the Quaker Foods division. The company also increased its guidance
• According to the FT, Nvidia is looking to be a cornerstone investor at the ARM IPO, albeit having been knocked back for the full takeover

SMALL CAP NEWS

• We mentioned the valuation on the UK market had reached low levels last week and it seems like Inflexion Private Equity Partners was listening as it launched a bid to take over DWF Group, the listed law firm at double the price it was trading. The company provides integrated legal and business services worldwide and operates through three divisions: Legal Advisory Services, Connected Services, and Mindcrest, an AI tool in the legal sector
• A couple of bits of news flow from ITM Power as it announced a strategic partnership with Mott Corporation, the world’s largest provider of porous transport layers (PTL) which are important components for PEM electrolysers and then its expansion into Germany with a new facility in Linden

THIS WEEK IN HISTORY

1852: Wells, Fargo & Co. is founded in San Francisco and Sacramento by Henry Wells and William G. Fargo to convert gold dust into cash for miners, as well as to transport and safeguard letters, gold nuggets and other valuable by-products of the California Gold Rush

2007: Indy Mac Bank is closed by US authorities, the first sign of trouble to come in the US banking sector. The bank had $19bn in assets at the time and was the largest bank failure since the Savings and Loan crisis two decades prior

IN OTHER NEWS – PRIME DAY

According to data from Adobe, US consumers spent $12.7bn during Amazon’s 48 hour Prime Day sale, up 6.1% on the prior year and short of the 9.5% growth expected with Adobe stating that an increasing share of customers used “buy now pay later” services.  Other data that tracked 34,000 unique users on Amazon stated that the average order size during the event was $54.05, up around 3% on the prior year with more than half of Prime Day shoppers indicating that they compared Amazon prices to other retailers before making a purchase

MARKET DATA

 As at 14^th July 2023. Source: FactSet

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